Predictive Analytics World '09: With great power comes great responsibility, but the power has yet to fully manifest and predictive analytics is already assuming significant responsibility as it battles hearsay and consumer fear.

At a conference that, in the name alone, suggests the expanse -- or at least the potential for a high degree of impact -- of predictive analytics, Stephen Baker, senior writer of BusinessWeek, opted to talk less about the opportunities the technology. Instead, he would focus on its pitfalls, or "what the world doesn't want from predictive analytics." (BusinessWeek will reportedly be renamed Bloomberg BusinessWeek since its acquisition by the financial news and information company).

Baker recalled the first time he was edited by a machine. Without much thought beyond journalist creativity, he had begun one of his blogposts with a series of questions. An hour after he had eventually published the piece, he received a call from one of BusinessWeek's search engine optimization (SEO) experts requesting that Baker change his introduction. "You never start with questions," Baker said, imitating the SEO expert, "the computer can't understand questions. So I had to rewrite the thing for the computer."

"What we learned to do over the decades is appeal to people with humor, irony," he said. These nuances of the human language like sarcasm aren't meant to be captured by machines, and yet, by making the language clear to the computer, Baker admitted that it's actually enabling us to communicate with a broader audience.

When Baker wrote The Numerati he had the generalist in mind, the person who perhaps didn't know what analytics was, let alone understand analytics. "This isn't a book about how do to it," he told the audience, "This is a book for everyone that doesn't have a clue...who think they're being analyzed by people they don't know." Unfotunately, he lamented, the greatest readership came from those in the field seeking affirmation.

People are scared of predictive analytics, a result largely of which is mere hearsay. Results from machine learning, Baker said, is "extremely imprecise." However, the industry is attempting to build a business case around this "crude understanding" of the ‘individual," even if, ultimately, the interpretation is wrong. The problem with this approach, he said, is that because it's being passed as a truth-rather than a "vague approximation," people are getting scared. Actually being able to model humans, he said, is still in its very early stages.

Large companies like IBM have derived optimization strategies that look at employees as machine parts-how to be more efficient at a given task-and financial portfolios-how much is a worker worth and what is the need and predicted output 10 years from now. Being able to predict these outcomes, Baker said, despite its imprecision, can at times yield a merely one to two percent improvement in productivity, but can translate into a substantial cost savings for companies the size of IBM. However, if this predictive capability is perceived as a truth in human optimization, "it freaks people out," he said.

He admitted, however, that he's just as guilty for cashing in on the "miracle of analytics." The marketing for his book overplayed the Big Brother effect, to which Baker, at the dismay of his editor, had to respond, "They don't know everything about you. You're in a bucket, just a small component." So long as the industry exaggerates the capabilities of predictive analytics, he said, the harsher the backlash.

Portfolio.com writer Roger Lowenstein said, not so approvingly, that Baker is the cheerleader of "the Numerati," those who will "model your behavior and ferret you out"-whether you're a "a crook or a would-be terrorist," or "a potential Tide buyer or an undecided voter in a swing state."

Baker admitted he make have skirted the issues of privacy in his book, or at least not given it the attention readers may have wanted. His own reasons include a disinterest in the issue, as well as his reluctance to get entangled with lawyers. Even so, he knows that the privacy-or rather, the threat of danger-sells. "The British are changing the title of my book to, They've Got Your Number." Consumers, however, are misinformed as a result of this fear tactic. "They think, "I don't want them to know that about me,'" Baker said, laughing in near disbelief as he conveyed the notion that people actually believe the Numerati are sitting around their computers watching individual purchasing behaviors and thinking, "Oh, it's funny that the just bought that."

"When we became industrialized...intelligence and analytics went into manufacturing and distribution--that's when we got slaughtered," he said. People weren't recognized understood-they were treated as herds divided into large demographic categories (urban, suburban, white, black, young old). "We've associated ant-like status with privacy," he said. With more data in the systems, however, companies are becoming knowledgeable again. Those who can earn the consumer's trust by increasing transparency and making the rules of privacy-or what Baker called the "privacy payoff"-extremely clear will get the business.

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